The Center's work on 'Process' Issues

Raze the Debt Ceiling

May 25, 2012 at 8:27 am

In my latest post for US News & World Report, I argue that dealing with the debt limit periodically is worse than a waste of time.

Policymakers who want to improve the country’s economic and budget outlook should scrap the debt limit (also known as the debt ceiling), which plays no role in enforcing budget discipline. Rather, in today’s dysfunctional political environment, it encourages reckless brinksmanship that makes it harder to work out the compromises necessary to achieve a sustainable deficit-reduction deal.

I explain that the debt subject to limit and its close cousin ”gross debt” (which is featured in those scary debt clocks)  are deeply flawed measures of no economic or financial significance to serious budget analysts.   But my real beef is that having a debt ceiling opens us up to irresponsible political mischief and dangerous policies.

My conclusion:

Anyone who thought last year that a debt ceiling fight could catalyze a responsible budget compromise should heed the proverb, “Fool me once, shame on you; fool me twice, shame on me.”

Romney’s Budget Proposals Would Require Massive Cuts in Medicare and Other Programs

May 21, 2012 at 4:59 pm

Governor Mitt Romney’s proposals to cap total federal spending, boost defense spending, cut taxes, and balance the budget would require extraordinarily large cuts in other programs, according to an updated analysis that we released today.

If policy­makers exempted Social Security from the cuts, as Governor Romney has suggested, and cut Medicare, Medicaid, and all other entitlement and discretionary programs by the same percentage, then nondefense programs other than Social Security would have to be cut 29 percent in 2016 and 59 percent in 2022.  Without the balanced budget requirement, the cuts would be smaller but still massive, reaching 40 percent in 2022.

The cuts that would be required under the Romney budget proposals in programs such as veterans’ disability compensation, Supple­mental Security Income for poor elderly and disabled individuals, SNAP (formerly food stamps), and child nutrition programs would move millions of households below the poverty line or drive them deeper into poverty.  The cuts in Medicare and Medicaid would make health insurance unaffordable (or unavailable) to tens of millions of people.  The cuts in non­defense discretionary programs — which include a wide variety of public services such as elemen­tary and secondary education, law enforcement, veterans’ health care, environmen­tal protection, and biomedical research — would come on top of the deep cuts in this part of the budget that are already in law due to the discretionary funding caps established in last year’s Budget Control Act.

Governor Romney’s cuts would be substantially deeper than those required under the austere House-passed budget plan authored by Budget Committee Chairman Paul Ryan (R-WI).  Over the 2014-2022 period, Romney would require $7 trillion to $10 trillion in cuts to programs other than Social Security and defense; the Ryan budget would make slightly more than $5 trillion in comparable cuts.   

These updated estimates are based on new information and budget proposals from the governor, updated budget and economic projections from the Congressional Budget Office (CBO), modifications in the Center’s assumptions about “current policy” to match those that CBO and other budget analysts use, and other factors.

Click here for the full report.

Here’s Our Take on the House’s Low-Income Cuts

May 11, 2012 at 4:52 pm

News stories (like this and this) and commentaries (like this) offer differing numbers on how the House-passed budget legislation of yesterday would affect programs for low-income Americans.  We’ve said the legislation achieves 42 percent of its savings from “assistance targeted to low- and moderate-income Americans.”

With various numbers floating around, we thought it would be useful to show you how we got our figure, which is based on estimates from the Congressional Budget Office (CBO).

CBO says the legislation would achieve $309 billion in savings from mandatory programs over the next ten years. Some 42 percent would come from programs like SNAP (formerly known as food stamps), Medicaid, and CHIP (the Children’s Health Insurance Program), and from social services for vulnerable children and elderly and disabled people.

Here’s how we got the figure:

  • $35.8 billion (or 11.6 percent of total mandatory savings) from SNAP, eliminating 2 million people from the program and cutting benefits for 44 million others.
  • $31.9 billion (or 10.3 percent) from scaling back the support that many people with incomes too low to owe federal income tax would receive under health reform to help them buy insurance in the new health insurance exchanges; this reduction would cause an estimated 350,000 people to forgo coverage.
  • $12.7 billion (or 4.1 percent) from reducing the number of low- and moderate-income uninsured people who would receive help buying coverage through the health insurance exchanges.  The legislation would eliminate federal grants to help states set up the exchanges, which CBO estimates would delay the establishment of some exchanges and, so, deny some low-income uninsured persons the opportunity to immediately buy subsidized coverage through them.  CBO estimates $14.1 billion in outlay reductions from this proposal, but we do not count as a low-income program cut the $1.4 billion of this amount that reflects lost grants to states — just the remaining $12.7 billion, which reflects lost health insurance subsidies for the uninsured.
  • $23.5 billion (or 7.6 percent) from Medicaid and CHIP.
  • $16.7 billion (or 5.4 percent) from terminating the Social Services Block Grant (SSBG), which states use to provide social services such as home-delivered meals for the elderly and child day care assistance; SSBG overwhelmingly supports services for low- and moderate-income families and individuals and focuses on lower-income communities.
  • $7.6 billion (or 2.5 percent) from reducing the number of people with incomes too low to owe federal income tax who claim the refundable part of the Child Tax Credit.  The legislation would require filers claiming the refundable part of the credit (but not the non-refundable part, which goes to filers with somewhat higher incomes) to provide their Social Security number.

The low-income cuts listed above total $128 billion, or 42 percent of total savings in mandatory programs in the House-passed bill.

Budget Bill Would Break Deal, Cut Programs for Vulnerable Americans

May 10, 2012 at 12:09 pm

The House is scheduled to vote today on legislation that would alter the bipartisan deal between President Obama and congressional leaders that was reflected in last summer’s Budget Control Act (BCA) by eliminating the “sequestration” (automatic cuts) in discretionary programs scheduled for 2013, and replacing it with a package that is strikingly unbalanced in how it affects different parts of the budget and, in particular, programs for low- and moderate-income people.

Last week, the Center issued an overview of the proposal, and we took a closer look at the effects of canceling the sequestration for 2013.

We’ve also recently issued reports examining the cuts the bill would make to critical domestic programs:

  • SNAP. The proposed cuts to the Supplemental Nutrition Assistance Program (formerly known as food stamps) would reduce or eliminate benefits for all SNAP households, including the poorest.
  • Social services. The bill would terminate the Social Services Block Grant, a uniquely flexible funding source that helps states meet the specialized needs of their most vulnerable populations, primarily low- and moderate-income children and people who are elderly or disabled.
  • Health insurance. The legislation includes a change in the Affordable Care Act’s subsidies that would cause 350,000 people to forgo coverage and make it more difficult for the health reform law’s insurance exchanges to function effectively.

House Budget Committee Votes to Break Budget Deal

May 8, 2012 at 5:02 pm

The House Budget Committee approved legislation yesterday that would alter last summer’s bipartisan budget deal and enable Congress to set defense funding above the agreed-upon cap, while cutting deeply into various non-defense programs, particularly those for lower-income families, as we explain in two new reports.

Our first report gives the big picture:

The House Budget Committee approved on May 7 a package of two bills that would alter the bipartisan deal between President Obama and congressional leaders that was reflected in last summer’s Budget Control Act (BCA).  It would eliminate the “sequestration” (automatic cuts) in discretionary programs scheduled for 2013 as a result of the failure of the Joint Select Committee on Deficit Reduction (the “supercommittee”) to achieve $1.2 trillion in deficit reduction, and replace it with a package that is strikingly unbalanced in how it affects different parts of the budget and, in particular, programs for low- and moderate-income people.

Our second report takes a closer look at the proposal to cancel the discretionary sequestration scheduled for 2013 while merging and reducing the existing discretionary funding caps.  As the graph shows, the bill would accommodate the Ryan budget plan to cut non-defense discretionary funding for 2013 nearly as deeply as if sequestration remained in place, while boosting defense funding above the level that the Budget Control Act sets.

House Budget Committee Votes to Break Budget Deal